INVESTMENT ALTERNATIVES

INVESTMENT AVENUE
A place where one can invest his surplus
Fixed or floating return
Security versus non-security form
Investment-accepting organization might have

an obligation or not
Negotiable versus non-negotiable
Risk is the inherent part of every avenue
May be in an organized form or unorganized
form
Regulation
Market-oriented versus others

INVESTMENT AVENUES

Non-Marketable
financial assets
Marketable financial
assets
* Money Market
Securities
T-bills and dated
securities
Commercial papers
and certificate of
deposit
Re-pos
A. Capital Market
Securities
Equity shares
Preferences shares

Bank Deposit
Post Office savings
account Deposit
Post Office time Deposit
Monthly income scheme
of post office
Kisan vikas patra
Insurance Schemes
Mutual Fund
Schemes of NBFC
NSC
Company deposits
EPF scheme

Marketable securities
Security form of investment avenues are in the
form of negotiable instrument.

MONEY MARKET SECURITIES

CAPITAL MARKET SECURITIES

Treasury Bills

Equity Shares

Dated Securities of
Government

Preference Shares

Debentures

Commercial Papers

Certificate of Deposit

BANK DEPOSITS
Savings Bank Account
Flexibility for deposits and withdrawal of
funds from the account.
Most of the banks have rules for the
maximum number of withdrawals in a
period and the maximum amount of
withdrawal,

Bank deposits
Recurring Deposit Accounts

Special kind of Term Deposits suitable for people who

do not have lump sum amount of savings, but are ready to
save a small amount every month.
Such deposits earn interest on the amount already
deposited (through monthly installments) at the same
rates as are applicable for Fixed Deposits / Term Deposits.
Creating fund for your child's education or marriage of
your daughter or buy a car without loans or save for the
future.

Bank deposit
Fixed Deposit Accounts

Wide range of tenures for periods from 7

days to 10 years.
Depositor can ask for closing (or breaking)
the fixed deposit prematurely by paying a
penalty (usually of 1%, but some banks
either charge less or no penalty).
The rate of interest on such deposits keeps

on varying with the prevalent market rates.

The

rate of interest for Fixed Deposits

differs from bank to bank (unlike earlier

Post office savings

accounts
Offered by the Indian post office as their savings

and investment schemes.

Adults can have a savings account with the post

office

A single individual or two-three individuals of

minimum of 18 years of age can open a savings

account
in
the
post
office.

Time Deposit Account

Any individual (a single adult or two adults jointly) can open an account.
Group Accounts, Institutional Accounts and Misc. account not permissible.
Trust, Regimental Fund or Welfare Fund not permissible to invest.
1 Year, 2 Year, 3 Year and 5 Year Time Deposit can be opened.
In case of premature closure of 1 year, 2 Year, 3 Year or 5 Year account on or after

01.12.2011, if the deposit is withdrawn after 6 months but before the expiry of one
year from the date of deposit, simple interest at the rate applicable to from time to
time to post office savings account shall be payable.
In case of premature closure of 2 year, 3 year or 5 year account on or after
01.12.2011, if the deposit is withdrawn after the expiry of one year from the date of
deposit, interest on such deposits shall be calculated at the rate, which shall be one per
cent less than the rate specified for a period of deposit of 1 year, 2 year or 3 years as
mentioned in the concerned table given under Rule 7 of Post office Time Deposit
Rules.
Rate of interest - 8.40%, 8.40%, 8.40%, 8.50% compounded quarterly for 1,2,3 & 5
years TD account respectively w.e.f.01/01/2014.
The investment in the case of 5 years TD qualify for the benefit of Section 80C of the
Income Tax Act, 1961 from 1.4.2007.

SECURITY FORM
An Equity share represents real ownership of

a company; it carries voting right for the

shareholder.
Preference shares have the preference in
terms of income/asset distribution over and
above equity shares. These carry a fixed
percentage of dividend. Types of Preference
Shares:
Redeemable versus non-redeemable
Convertible versus non-convertible
Participating Preference shares

SECURITY MARKET CLASSIFICATION OF EQUITY SHARES

Blue chip shares

Stocks of leading and nationally known companies

that offer a record of continuous dividend payments

and other strong investment qualities
Growth shares
Shares issued by a firm with a consistent record of

above average earnings. Such shares are expected to

trade at an increasing value over an extended period.
Income shares
A class of shares offered by a dual purpose fund that
has little room for capital appreciation but gives the
holder a portion of all income earned in the portfolio.

SECURITY MARKET CLASSIFICATION OF EQUITY SHARES

Cyclical shares
An equity security whose price is affected by ups and downs in the overall

economy.
Cyclical stocks typically relate to companies that sell discretionary items that
consumers can afford to buy more of in a booming economy and will cut back
on during a recession.
Defensive shares
A stock that tends to remain stable under difficult economic conditions. Like

food, tobacco, oil, and utilities. These stocks hold up in hard times because
demand does not decrease as dramatically as it may in other sectors.
Defensive stocks tend to lag behind the rest of the market during economic
expansion because demand does not increase as dramatically in an upswing.
Speculative shares
That involve a very large risk to invest in.

DEBENTURE
A type of loan from general public
No voting rights
Payment of interest at a fixed rate is the

legal and contractual obligation of issuing

company
Can be secured against the assets of
issuing company or unsecured
Priority over preference and equity shares
Interest is a tax deductible expense

TYPES OF DEBENTURES
Redeemable vs. non-redeemable
Convertible vs. non-convertible
Debentures with warrants
Deep discount or zero coupon debentures
Secured vs. non-secured

INSURANCE
An endowment policy
A life insurance contract designed to pay a

lump sum after a specific term (on its

'maturity') or on death.
Typical maturities are ten, fifteen or twenty

years up to a certain age limit.

Some policies also pay out in the case of

critical illness.

INSURANCE
Money back plan
A plan in which part of the sum assured is paid back to the policyholder at regular
intervals.
Whole life insurance
began as a "term to age 100" life insurance product in response to market
demands for an insurance policy that would remain in force for as long as the
insured was still alive and that would provide some type of guarantee of benefits
when the insured finally did pass away.
These early whole life products stressed the guaranteed nature of the product as
well as level premiums.
As long as the premiums were paid, the contract remained in force.

INSURANCE
A Unit Linked Insurance Plan (ULIP) is a product

offered by insurance companies that unlike a pure

insurance policy gives investors the benefits of both
insurance and investment under a single integrated plan.

REAL ESTATE
Residential house
Good total returns
Availability of loans
Wealth tax!.......assessed on historical value
Psychological satisfaction

PRECIOUS OBJECTS
GOLD AND SILVER
PRECIOUS STONES
ART OBJECTS
PAINTINGS
ANTIQUES